The Canadian Economy in International Development

MR. HERMANT:

Ladies and gentlemen: Comedian Joey Adams tells a story about his youth. He recalls, "I once asked my father to buy me what the poor kids had. He said, 'What do you want?' I said, 'Buy me a slum.' He then asked my mother for her okay and she said, 'It's okay with me. Just make sure it's in a nice neighbourhood."'

Our guest of honour today, Mr. Michel Dupuy, is president of the government agency that is trying to create good neighbourhoods on an international scale.

There is little need for me to expound to you the objects of the Canadian International Development Agency. With a budget in the area of one billion dollars and employing approximately one thousand civil servants, CIDA supplies aid to some seventy developing nations that have climate, terrain, resources, political systems, cultures, languages and economic systems very different from those in Canada.

CIDA's announced aim has been to provide aid for the poorest people in the poorest countries and in fact the agency concentrates on countries where the per capita income is below two hundred dollars per year.

Nonetheless, the mere size of CIDA's financial commitment has made it the subject of scrutiny in the Auditor General's office, in Parliament, and in the press--so if one wanted a definition of the fabled "hot seat", the presidency of CIDA is probably as good a definition as there is.

Michel Dupuy took over the agency in February of 1977--as heralded by The Toronto Star in the heading "Aid Agency Gets Trouble Shooter".

The Globe and Mail speculated that "The change represents a move from a man who has kept a high profile [Michel Dupuy's predecessor, Paul Gerin-Lajoie] to one who has moved largely behind the scenes over the years."

It is true that Michel Dupuy has been in government from the beginning of his career. He started in the Privy Council and a year later was moved to External Affairs. During this training period--and I'm assuming that the training period finished when he took on his present position--he served in Washington, in Brussels, and then returned to Ottawa to become the Director of Economic Affairs. He has represented Canada as deputy head of the Canadian Mission to the European Communities and as Deputy Permanent Representative to the Canadian delegation to the North Atlantic Council in Brussels. And before taking on his present position, he was director of the Bureau of Economic Affairs in Ottawa and finally Under-Secretary of State.

Born in Paris and educated in schools in Montreal, Oxford and Paris, Michel Dupuy takes over an agency which can be said to suffer generally from a lack of credibility with the Canadian public. All of us, I am sure, have heard one story or another about the lack of communication--within the agency or misunderstanding of agency projects--usually in pretty ludicrous terms. There is no doubt that foreign aid is a particularly sensitive area.

For example, Gamal Abdel Nasser, late president of Egypt, is quoted as follows in a speech in which he turned down an economic aid package being offered to his country from the West: "We're a sentimental people. We like a few kind words better than millions of dollars given in a humiliating way."

That feeling on behalf of the recipient, combined with the uneasy feelings about agency competence that one hears in Canada, sets the framework inside which Michel Dupuy must operate.

Perhaps Shakespeare said it best in Hamlet. "For to the noble mind rich gifts wax poor when givers prove unkind." Ladies and gentlemen, it's a pleasure for me to introduce to you the President of the Canadian International Development Agency, Michel Dupuy, who will address us under the title "The Canadian Economy in International Development".

MR. DUPUY:

Perhaps I am tempting fate by speaking about foreign aid at a time when unemployment is reaching all across the country, when several Canadian industries, such as textiles, footwear and electronics, are having serious problems because of drastic import competition, and when many communities are afraid of having their economic props knocked out from under them.

With our current economic conditions the two most frequent questions Canadians are raising about development assistance are:

Why are we in the aid business? and Are we doing it well?

Indeed, ever since I became President of CIDA earlier this year, I have been much concerned with these two questions and the significance of our aid program for our national interests and the Canadian economy. So much so, that I have chosen them as the subject of this address, even to the detriment of other north/south issues which well deserve attention. But the field has become too vast and complex to be covered in the time available today. Let me simply say that I regret it because many north/south issues are much in need of clarification and understanding.

Why do we have a large program of assistance to international development? We all know that poor countries need it. The point I want to make is that we too need it.

A common perception of foreign aid in general, and of CIDA in particular, is that we are handing out our tax dollars to assist the poorer countries of the world, and that we are doing this exclusively out of altruism, human solidarity and a moral imperative.

Far from being apologetic, we, as Canadians, should be proud of what we have done. Do we want to live in a world of starvation, violence, poverty and destruction? Surely not, because this is not what Canada is made for. We know that in what is fast becoming a dramatically interdependent world, we cannot let more than half of this world go from bad to worse without taking an extremely short-sighted and wasteful view of our own future.

Thousands of Canadians who have served abroad have brought to their work a devotion, an understanding and a sense of duty to mankind which is all too rare in international relations. It is said by some that we are wasting our money on aid, but I am glad that no one has ever suggested that these devoted people are wasting their lives. The developing countries themselves are not mistaken. They have recognized and praised the disinterested character of Canadian aid. We owe this recognition to those Canadians who have made it work; CIDA people who, over the years, have done their best, often in trying circumstances; consultants, teachers, engineers, executives, representatives of provincial governments and, not least, non-governmental organizations. I have met many of these people, either in the field or on their return. They had their rewards and disappointments, but they felt that the experience had enriched their lives and improved their ability to contribute to our national life. I have said before, and I am pleased to repeat, that we intend to give non-governmental organizations increased support.

But there is more to foreign aid than a moral imperative and an enlightened view of human solidarity. The funds expended under that heading reflect our immediate concern about the north/south division of our planet, the current state of the world economy and the political tensions they are creating. Foreign aid, or its up-dated version, international development co-operation, serve other legitimate Canadian interests.

Many have described, far more vividly than I could, the risks and dangers inherent in an ever-increasing economic and social gap between rich and poor nations. We do not need the hindsight of historians to appreciate that it is one of the most compelling and dramatic problems of our times. Surely one of the lessons of the recent energy crisis, and of world recession, is that no country is immune from major changes, let alone upheaval, in the world economy. It has long been recognized that the well-being of developing countries is related to that of industrialized countries, but only more recently that the reverse is no less true. It is unfortunate that this basic interdependence between developing and industrialized countries should often be obscured by the tensions or rhetoric of the north/south debate; because it is on compatible long-term interests and a growing sense of solidarity that the best chances of progress rest.

Canada, less than any other industrialized country, can remain indifferent. We have a vulnerable economy, and we are both an industrialized and a developing country. Our best future lies with a balanced and growing world economy in which developing countries have their rightful place. Surely, to contribute to it is in our own long-term interest. I shall not attempt to evaluate at this point to what extent this contribution should be in fields other than aid--such as trade in commodities, structural reform, access to markets, debt relief and other elements of the New International Economic Order (NIEO). This in itself could be the theme of another address. But clearly the magnitude and spread of the problem call for an integrated approach, including a vigorous aid program. Moreover, I think we can agree on the need for wise handling of the economic levers, both nationally and internationally.

Even though developing countries are increasingly looking to automatic forms of resource transfers based on structural changes in the world economy, their need for aid is not abating. Indeed, the needs of many have never been so great or so urgent. With rising energy costs, deterioration in terms of trade and mounting indebtedness, their balances of payments have become precarious. Failing an increased flow of official development assistance, they will have to borrow more on money markets. When they have reached the limit of their ability to borrow--some are already there--their policy choices will be a curtailment of their development plans, protectionist action to safeguard their balance of payments, or default. Will any of these courses contribute to the expansion of the world economy which we so badly need? Yet this may be the alternative to responsible aid and international development policies by major donor countries.

Our aid programs are also at the inception of our bilateral relations with most developing countries. If we want to build lasting and mutually beneficial relations, we must help their social and economic development with a keen understanding of their problems. Many industrialized countries who are our main competitors already have wellestablished relationships with a number of developing countries based on their colonial past, or on geopolitical and historical factors. These industrialized countries realize full well the increasing importance of developing countries in shaping the world economy. And so should we. Many of these developing countries may prove to be our indispensable partners of tomorrow. It is for this reason that our bilateral programs are of even greater significance in the development of sound economic relations between Canada and the developing world.

Let me finally deal with the argument that "Charity begins at home." Yes, it does. This is why 60 per cent of our total aid budget is spent in Canada for goods and services provided to developing countries. The sum is close to $650 million annually. It is estimated that about 100,000 jobs can be related directly or indirectly to our foreign aid program.

The bilateral aid programs provide foreign markets for key Canadian industries and may sometimes represent a major source of contracts. For example, projected CIDA spending for this year in the field of energy, is about $56 million. Expenditures on transportation infrastructure and equipment are even greater, particularly in the purchase of rails, rolling-stock and locomotives, which should reach over $70 million this year. We have spent about $100 million on telecommunications over the past five years.

Loans and lines of credit to developing countries, which are in excess of $70 million for this year, provide that goods and services will be purchased in Canada. The favourable rates of the loans, zero or three per cent, allow Canadian suppliers a competitive edge, and the business resulting represents additional revenue for Canadian manufacturers. This revenue, in turn, maintains employment, supports production levels and helps industrial expansion here.

By establishing Canadian technology and expertise in the developing countries on whatever terms we grant them, we are laying the groundwork for repeat business and for an expansion of Canadian trade in the future. I trust this opportunity will be seized by many Canadian firms. At the same time, it becomes possible for Canadian investors to gain preferred terms for investment in many developing countries.

These are legitimate features of our aid programs. Developing countries need, in addition to our understanding, our skills, our equipment, our food, our commodities, perhaps even more than our money. They well understand our desire to establish long-term viable economic relationships with them based on their capacity to grow, because they want to establish the same kind of relationship with us.

One hears a good deal about the dwindling support in Canada for development assistance. This is a matter for genuine concern, if it is right that foreign aid contributes to a better world environment and the development of mutually beneficial relations between Canada and developing countries. I am happy that the majority of Canadians still make a positive judgement. The latest public opinion poll carried out by the Centre de Recherche sur Popinion publique of Montreal concludes that 54 per cent of Canadians are interested in the developing world; and more remarkably, 54 per cent of Canadians, the same percentage, have contributed money to agencies working for development in those countries.

However, there is no room for complacency. It is not enough to have sound reasons for giving aid. It must be well managed. Indeed, much of the current questioning of our aid programs is addressed less to its intrinsic validity than to its management.

"Are we doing it well?" is a far more complex and difficult question. Here we have to measure against agreed objectives and criteria each and all of the main elements of an aid program. The volume and growth rate of ODA; the relationship of aid to other resource transfers; its quality measured in terms of liquidity, procurement, grant/loan ratio and loan terms; the relative importance of various aid channels--bilateral, multilateral, food aid, special programs; geographic distribution, sectoral distribution and target groups. The examination has to be in terms of both effectiveness and efficiency. International development is no longer a simple business.

Economically developing countries are not a cohesive unit, although their political solidarity is beyond question. One cannot rate Saudi Arabia with Chad or Nepal. If we are to be responsive to the needs of the countries we want to help, we must accept that these needs are diverse and relate to different levels of development, and that our aid programs will reflect this complexity. It must also be recognized that the border-lines between survival, absolute poverty, under-development and economic take-off do not necessarily coincide with national borders, which further add to the complexity. Indeed, we lack agreement on a reasonable definition of these terms.

In our evaluation we must also bear in mind that transfer of wealth cannot be separated from creation of wealth; a valid method of transfer may have to be rejected if it reduces the global capacity to generate wealth.

I do not make these points in any apologetic way, but to illustrate why the evaluation of our aid programs has become such an increasingly difficult business and why we are often prone to make emotive, rather than considered, judgements about aid.

Understandably, we do turn emotive each time we hear of another so-called "horror story". You may recall the "ship that would not float", a fisheries school vessel destined for Colombia. As it turned out, the ship was sound; it was the test that was faulty. What about the rotten potatoes for Haiti? The ship was caught in storms, the hatches leaked, and the potatoes were indeed very rotten. Yes, it is true that some cattle died on an air shipment to India. But Idi Amin never had, as alleged, a huge barbecue party of Canadian beef at the expense of the Canadian taxpayer.

In this business we have to contend with storms, collisions, strikes, illness, delays, acts of God and human error. I have no secret formula for unfailing success; but I do welcome a critical interest in our activities because it helps us to learn and improve. I will, for my part, do all I can to share our experience, knowledge and quandaries with all those interested in development, so that Canadians may become better informed in their understanding and judgements.

Much has been done in CIDA over the past six months to improve our ability to manage the Canadian aid program and relate it more closely to the Canadian economy.

The Canadian government's decision of May last to stop the decline in the percentage of ODA to GNP determined the minimum rate of growth in our budget, and has improved our ability to plan the management of our cash flow over the next few years.

We have completed a corporate review and will shortly implement some organizational changes which will help tighten the management of programs and projects. We are also reviewing the Strategy for International Development adopted in 1975 for the second half of this decade, to determine the extent of its continuing validity for the 1980s.

We are making good progress on the development of new forms of co-operation, including industrial co-operation which we hope shortly to bring past the experimental stage. We shall look closely at what other countries are doing to facilitate the adaptation of their own economy to meet the challenge of co-operation with developing countries.

In these tasks we are pursuing several major objectives:

1. We want better to relate developing countries' needs to Canadian capability. It is a paradox of our times to have idle capacity in industrial countries when there are such pressing needs in developing countries. The nature of our programs should reflect what we can do best. There is already an increasing concentration in our bilateral program on sectors of high Canadian competence relevant to developing countries, such as certain areas of agriculture, forestry, water resources development, transport, communication, energy, resources surveys, technical training, and so on.

2. We want to improve our effectiveness and efficiency. This means a sharper definition of our objectives, better evaluation and tighter management. It also means a greater presence on the ground--such complex programs cannot be run by remote control; greater understanding of the development needs of the countries we help; and a determination to resist dispersal of our efforts.

3. We want to provide greater opportunity for Canadian private initiative to relate to the development of developing countries. CIDA has pioneered co-operation with non-government organizations. Provincial governments have been associated with VADA, a voluntary program for food aid and agricultural development. Canadian universities are showing much interest in participating in research for development. Our industrial co-operation program will be designed to provide more support to business initiative. We intend to contract out to the maximum extent, compatible with a tight control over the expenditure of public funds. The strength of our program will not be measured by the size of a bureaucracy, but by the amount of support it receives from all sectors of Canadian life.

I realize I have not yet answered the question: "Are we doing well?" I have instead talked about how we intend to do better because it is my prime concern. But I have, of course, my own evaluations for my own purposes. In brief, I believe that our programs, even with the soft spots which our corporate review revealed, well deserve, as a whole, the fine reputation they have in the world. And I also believe that CIDA can be made into an increasingly valuable instrument of national interest and foreign economic policy.

In conclusion, I would not like to leave you under the impression that the assistance we provide to the Third World is, in the future, to be inspired solely by commercial and selfish considerations. If I have insisted at length on the returns from foreign aid, it is because so little is known about that aspect of our activities that I felt something should be said to set the record straight.

It is my conviction that there exists no fundamental contradiction between the economic interests we serve at home or abroad and our idealism. It is in this light that about one-third of CIDA's expenditures are aimed at providing basic human needs in the poorest parts of the world. This is a kind of obligation that Canada should not refuse--and that Canadians do not want us to ignore. The ability of non-governmental organizations in this country to raise on their own almost $50 million annually for assistance abroad conveys a very strong political message. And it is being heard.

Finally, I think that most of us, however great our altruism, still believe that we are our brother's keeper. This may not be enough in a turbulent and unstable world. Perhaps we should consider whether we can be our brother's brother.

The appreciation of the audience was expressed by Mr. William M. Karn, Past President of The Empire Club of Canada.